Public Bill Committee

[Mr. Christopher Chope in the Chair]

Christopher Chope: Good morning everybody. I am delighted to see an army of volunteers here today to participate in consideration of the Bill. This is the first time I have had the privilege of chairing a Committee on a private Members Bill, so it is a novel experience for me. Before we start, I wish to make a couple of announcements. If people wish, they can remove their jackets, and if they have mobile phones or pagers, I should be grateful if they ensured that they do not disturb our proceedings.

Clause 1

Meaning of qualifying debt etc

David Gauke: I beg to move amendment 1, in clause 1, page 1, line 20, leave out identify and insert
have identified by the date that this Act comes into force.
It is a great pleasure to serve under your chairmanship, Mr. Chope. This is the first time I have served on a Committee considering a private Members Bill, butnotwithstanding that it is a new experience for youI am sure you will guide me as necessary.
The amendment relates to a specific aspect of the meaning of qualifying debt under the clause. I shall make broader remarks about the definition in our stand part debate and set out briefly what I hope to achieve during this mornings proceedings. The amendment is narrow. It relates to which countries fall within the definition of qualifying debt. Essentially, the regime focuses on heavily indebted poor countries falling within the HIPC initiative, but it is also extended to include potentially eligible initiative countries. I tabled the amendment to obtain clarification of the provision. Under subsection (6),
Potentially eligible Initiative country means a country 
(a) that the International Monetary Fund and World Bank identify as potentially eligible for debt relief under the Initiative, and
(b) in respect of which decision point has not been reached.
I was not entirely clear when reading the provision whether it included simply those potentially eligible initiative countries identified at that point, or subsequently.

Gerald Kaufman: I am sure the hon. Gentleman is speaking to the amendment with the most constructive of intentions. If it were accepted, would enactment of the Bill be a cut-off point for such identification?

David Gauke: I am seeking to clarify whether the Bill already does what the right hon. Gentleman suggests. If I develop my point, perhaps I can also deal with his intervention more fully. The words
potentially eligible for debt relief under the initiative
suggests that it is not a cut-off point, although I note that the explanatory notes to the Bill refer to
countries that have been identified,
which suggests that it is a cut-off point. They go on to state:
Five countries currently fall into this country.
The word currently suggests that the position could change, and that it is not a cut-off point. It is fair to raise such an issue because the general thinking behind the Bill and the clause is to ensure that it is retrospective. There are good reasons for that, which we shall debate in a moment or so. The intention is to say, Here are particular debts that will, at the date of commencement, fall within the regime set out in the Bill and to which the debt reduction mechanisms will apply.
Subsection (11) states:
If the terms of the Initiative are amended after commencement in such a way as to change a relevant eligibility condition, this Act has effect as if they had not been so amended.
The intention is largely to say, This is where we are now; this has happened in the past; these particular loans are effectors.
There is a considerable attempt to provide certainty regarding where the Bill actually applies. It could be understood to mean thatin the case of subsequent changes of facts in a given area, such as a country becoming potentially eligibledebts not currently affected by the Bill would become so affected. That may be an incorrect way of interpreting it, but my intention in tabling the amendment is to seek clarity on that point.

Michael Connarty: I agree with my right hon. Friend the Member for Manchester, Gorton, in that I am sure the amendment is well intentioned, but in fact the subsection refers to a potentially eligible Initiative country, not debt. I have just read a book about someone who followed in the footsteps of David Livingstone across the Democratic Republic of the Congo. At one time it had 11,000 kilometres of motorway, and now it has 1,100 kilometres of passable roads. So a country that at the moment seems quite secure after the ravages of war could end up, like the DRC, unable to pay back the debts it currently has. Given that the provision focuses on the country, to say that nothing could be considered for the country in question in future would be entirely wrong.

David Gauke: I take that point and I am grateful to the hon. Gentleman for acknowledging that the amendment is well intentioned, as was his intervention. I do not want to get into one of the broader debates just yet. However, one of the issues that the Treasurys consultation paper has tried to wrestle withand which the Government and the hon. Member for Northampton, North acknowledged in her thoughtful speeches on Second Readingis that we do not want to pursue a policy that means that the costs and interest rates that developing countries will have to pay will go up because of a risk premium. There is a carefully calibrated argument to address that issue. The Governments consultation paper and the Bill have addressed it by providing some certainty, essentially looking backwards and saying, These particular debts are covered. I do not want to labour this pointI want to let the hon. Lady proceedmy purpose is simply to provide some certainty on what the thinking is and what the wording means.

Tony Baldry: For very good constituency reasons, some of us were not present at the debate on Second Reading. It would help the Committee if we had an understandingor if my hon. Friend gave us an understandingof what the casus belli are today. What are the differences, if any, between my hon. Friend and the supporters of the Bill? What are the outstanding issues that he thinks we need to press? Otherwise, it is a bit of a secret garden, consisting of Treasury nerds, that some of us might like to feel we could take part in.

Peter Bottomley: On a point of order, Mr. Chope. Is the word nerd an acceptable parliamentary expression?

Christopher Chope: It is an acceptable parliamentary expression. As far as this intervention is concerned, may I remind the Committee that we are considering a very narrow amendment? During the intermission, perhaps the hon. Member for Banbury might like to look at the Hansard report of Second Reading to bring himself up to date.

David Gauke: I am grateful to my hon. Friend the Member for Banbury for that intervention. I will not try your patience, Mr. Chope. As I said earlier, I wanted to deal with the questions that arise from this provision, but perhaps it would be more appropriate to do so in the stand part debate.

Tim Boswell: Is not the issue simply that one sets aside contracts at ones peril, and that it is important that, although there is the real-world issue of the burden of debt, which needs to be relievedeveryone in the Committee wants to address that; indeed, it is why we are hereit needs to be done in a precisely defined way that is not likely to give rise to trouble or to compensating commercial premiums in the future?

David Gauke: I am grateful to my hon. Friend, who sets out the issue very well. There is no casus belli. I hope we will be able to work constructively, as we did on Second Reading, and proceed with the Bill in that spirit.
The intention, as my hon. Friend points out, is to ensure that the Bill is appropriately calibrated so that it will address the legitimate concerns of developing countries and assist them. There is no sympathy in the Committee for vulture fundsthe intention is to help developing countries. However, in doing so, we must be careful and not make developing countries pay a risk premium on borrowing in the future, which will have a detrimental effect. That is a concern that we all recognise, which is why we want to calibrate the measures appropriately, and hence my entering now into some of the arguments I was going to raise in the stand part debate.
Amendment 1 is a probing amendment. The general approach in the Bill is to look back and enable us to identify a narrowly defined set of debts to which the Bill will apply, but there appears to be an exception. One reading of the Bill suggests that a country could become eligible and at that point, debts that were entered into before the legislations commencement, but which could not currently be identified because we do not necessarily know which countries will become eligible, would suddenly fall within that jurisdiction. I am not sure that, in the great scheme of things, the consequences of that would be particularly terrible, because we would be talking about debts incurred in the past. However, the clauses wording is not entirely clear, and if the hon. Lady could provide some clarity, that would be of service to the Committee.

John Hemming: I am sorry, but I cannot agree with the amendment if it is pushed to a vote. The clause is about identifying countries to which the Bill, which is effectively a form of creditors voluntary arrangement whereby everyone will get the same poundage, will apply. More complex issues that relate to how enforceable the Bill will bethe issue is an international one, and the Bill will only affect the UKs jurisdictionare for later. Logically, if we are to have a creditors voluntary arrangement whereby everyone gets a poundage, all creditors should get the same poundage. That should apply to all countries where that process occurs.

Sally Keeble: It is a great pleasure to serve under your chairmanship, Mr. Chope. I know that, given your interest in the Bill, all the issues will be aired and debated. I welcome the amendment, which is important. This is an historic Billit is the first to deal with this issue, which is a concern in a number of countries. We have an opportunity to get the Bill through by the end of this Parliament. Given the time constraints, it is important that the issues are aired and that people are clear about the Bills purpose.
The Bill has to provide for the orderly management of debt. There is a need for consistency and certainty, which is important for developing countries economic management and the risk premium they might face in the future. Therefore, having clarity on which countries are in and which are out is important.
The principle here is that the scheme as it was agreed by the World Bank is what should apply. If the scheme varies at some date, this legislation will not. The legislation is based on the 2004 ring-fencing of the HIPC initiative, so there is no question of revisiting the matter and including new countries, to a pointI will explain that more fully. Repeated assurances have been given, and the hon. Member for South-West Hertfordshire knows, that the measure applies not to future, but to historic, debt. That is because the HIPC process manages the debts of heavily indebted poor countries, so that they can start with a clean sheet and manage their economies in the future. If they take on further debt, they can do so on reasonable terms, and not be subject to the vagaries of misfortune to which they have been in the past.
There are two issues on the potentially eligible countries about which I think the hon. Gentleman is concerned, and which need some clarification. The HIPC initiative was ring-fenced in 2004, and if circumstances change after that it is a whole different ball game. There are some countries that might have been completely closed but might have been eligible for the HIPC initiative at the 2004 point, based on information that has come to light. The example that springs most to mind is Afghanistan, which, on the 2004 figures, qualified for the initiative. I imagine that Zimbabwe is the only country anyone can think of that is currently a closed society in which information is not known, that might be included on 2004 data. I suspect that if there was a big debate here about finding a proper way to manage Zimbabwes historic debts, people would accept that if we looked at the 2004 data and it applied, the country would go into a set process.
The only other possible circumstance would be a country that currently does not exist but for which there is data, and it is clear that on the 2004 data it would have qualified. Perhaps the only such country that one can think of is southern Sudan, and people would accept that, given the circumstancesdepending on what happens, as there will be a referendum therethat might also be appropriate. It is not a matter of saying, however, that we will have a 2008 or 2009 cut-off point. The data that are used to determine whether a country is a HIPC were ring-fenced in 2004 and are therefore not open to variation. That provides a consistent and coherent way of dealing with the debts of a closed list of 45 countries, as set out in the explanatory notes.
The pre-decision point countries are well known: Comoros Islands, Eritrea, Kyrgyz Republic, Somalia and Sudan. We have a defined list of countries, historic debts and an agreed process, which has been scrutinised nationally and internationally. All that therefore provides the certainly that the hon. Gentleman seeks and the assurance that the measure will not spread to any list of countries drawn up on any criteria. The process is clearly defined, and that certainty will help to ensure that the money markets see that it is consistent and not whimsical. I hope that that also deals with the concerns about the risk premiums, and that the hon. Gentleman will withdraw his amendment.

David Gauke: I am grateful to the hon. Lady for her remarks. She has clarified the intention behind the wording of subsection (6). I accept that other countries, not currently on the list of eligibility for the HIPC initiative, may be added, and she set out the very limited circumstances in which that might happen. As I may have mentioned in my earlier remarks, amendment 1 was probing, to seek clarity on that point. Having achieved that clarity, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Peter Bottomley: May I suggest to the hon. Member for Northampton, North, who is promoting the Bill, that she might want to consider adding 2004 to the Bill at a later stage? The year appears once, by chance, in clause 7. The issue raised by my hon. Friend the Member for South-West Hertfordshire might not be immediately obvious to many people but, given that those involved in providing future loans might have their attention drawn to the Bill, if and when it is enacted, we ought to make it clear that there is a time limit to which it can go back. That would be a little mark of safety, and it would be helpful if it is possible to do that with a bit of imagination later in the parliamentary procedure.
Secondly, subsection (11) states:
If the terms of the Initiative are amended after commencement in such a way as to change a relevant eligibility condition, this Act has effect as if they had not been so amended.
The impact of that on everyone is not immediately clear. Explanation or modification later on might be useful.

David Gauke: I am grateful for my hon. Friends comments.
Clause 1 is at the heart of the Bill because it concerns the definition of a qualifying debt. Getting the definition right is vital, a point that we touched on in the last debate. The hon. Member for Northampton, North was absolutely right to make that point. Criticisms about the definition of qualifying debt come from two directions. Some argue that the clause is too narrow and that the focus is on HIPCs. Why should we not apply the Bill to developing countries as a whole? Why should we not apply it to other regimes in which debt reduction has been negotiated? Does the Bill go far enough? No doubt at some point in the course of the morning we shall debate the impacts of the Bill, including the benefits arising for developing countries, which some will argue are unduly modest.
The counter-argument, which was put in a number of responses to the Treasury consultation and some of which was quoted on Second Reading, is that if we interfere in contractual rights we run a risk of undermining confidence in the sanctity of contracts. Lenders will become wary of lending to developing countriesperhaps HIPCs specificallybecause of the risk of being caught up not so much in the Bill as in future legislation using the Bill as a precedent.
We ought to debate such matters intelligently, to ensure that we calibrate the proposals correctly. I thank the hon. Member for Northampton, North for how she has consistently conducted the debate, ensuring that we do not fall into oversimplifying the matter and dismiss such concerns but that we address them. I am sure that no one in Committee would in any way want to jeopardise the long-term ability of developing countries to borrow at affordable, sustainable and sensible levels. Consequently, I shall ask the hon. Lady a number of questions and, in responding, she can set out why those who are concerned about the Bill should be reassured.
First, why should the Bill be focused on heavily indebted poor countries and on them alone? Why not include all creditors to developing countries? Why is the focus on loans entered into before the commencement of the Bill? Why is the Bill essentially retrospective legislation, applying to contracts entered into in the past, but does not apply going forward? We understand why, but it would be helpful to the Committee if the hon. Lady could set that out. We have already touched on why potentially eligible countries are included. If she is in a position to provide some breakdown of the benefits, and whether they will apply to countries falling within the existing HIPC initiative or those potentially eligible for the initiative, that might be helpful. She has already touched on the issue, to be fair, but perhaps she could add a word or two about why subsections (11) and (12) mean that any amendments to the initiative will not change the nature of the Billadditional debt will not be liable to be treated as falling under the Bill as a consequence of any changes.
Essentially, I seek as much reassurance as possible from the hon. Lady that the Bill is a one-off. I do not say that because of the concern about the position of developing countries going awayfar from itbut the Treasury consultation response recognised that if we focus on narrowly defined areas, if we look backwards at debt already entered into and if we restrict the effect of the Bill to specific countries, the more we provide reassurance that we shall not come back in the future and produce another Bill, although well intentioned and undoubtedly with support from some organisations outside this place, that could have an impact on the attractiveness of lending to developing countries. We all seek to achieve that balance, which is finely calibrated. We should use the opportunity of the stand part debate to ensure that all sides recognise that we must be careful.
Comment from the Minister, setting out his views, will also be welcome, so that all sides recognise that we need to focus narrowly, to ensure that we are serving the best interests of developing countries and not engaging in gesture politics, which could do harm. The Bill is not about that, but we need to put on record that we are thinking the issues through and that we recognise the dangers that exist.

John Hemming: The essence of the Bill, as discussed earlier, concerns a country being unable to pay its debts because its income is too low. An individual would have some form of bankruptcy arrangement and, effectively, we are dealing with countries in such a positiontheir exports are so low that they cannot pay.
We cannot get away from the fact that in future, lenders will take into account countries ability to repay debt when loaning funds to them. I think that that is a healthy situation. Having a situation where lenders hold out massive quantities of money to developing countries, some of which find their way into Swiss bank accounts and do not do the country any good whatsoever, is not helpful for developing countries. Within all that, there are factorsfor example, the Bill will only affect UK jurisdiction, so debts enforceable in other jurisdictions remain enforceable there anyway. It is an issue that requires international rather than UK resolution.
There is also a question about whether it is appropriate to have corporate entities controlled by the Government included within the Bill, as opposed to sovereign debt. The nature of sovereign debt is particularly different. If one looks at the history of Haiti and how sovereign debt has caused problems there over centuries, and the fact that most debt disappears into peoples estates when they die, one can see that that particular type of debt hangs on. Again, we are interfering with contractsthere is no question about that. However, bankruptcy arrangements interfere with contracts, so it is with precedent.

David Gauke: The hon. Gentleman is making a good point, and I say that not only because I also made that point on Second Reading. There is no equivalent of insolvency procedures for a country. Interfering with contractual rights is something that, by and large, we do not believe in doing in this country. However, we recognise that there are times when we have to do so in a case of bankrupt individuals and insolvent companies. He is making a helpful point; those are the narrow circumstances in which interfering with contractual rights can be accepted.

John Hemming: I thank the hon. Gentleman for that intervention. We are in agreementwe are effectively dealing with the insolvency of countries, which do not have the revenue. If there is insolvency of countries, we are asking whether the poundage applies to everyone. That is a fair process to resolve a situation. If a country in that situation decides, in the interest of its long-term credit rating, to put particular effort into paying someone, that will be a different issue. However, that is an issue for the countries themselves. The responsibility is always with lenders to consider the ability of the people to whom they are lending funds to pay them back. There have been many problems with people doling out money without considering whether people can pay it back. We see that in the banking crisis that we have had ourselves. To that extent, I am supportive of the Bill, and I should congratulate the hon. Member for Northampton, North on promoting it.

Stephen Timms: I, too, am delighted to serve under your chairmanship this morning, Mr. Chope. I welcome and applaud the pioneering work of my hon. Friend the Member for Northampton, North over an extended period, recently supported by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne).
I also agree with much of what the hon. Member for South-West Hertfordshire said in his remarks. The Government agree that the Bill should mirror the internationally agreed HIPC initiative, as the clause specifies. The aim is to ensure that all creditors provide debt relief in line with the initiative, as the vast majority of creditors are already doing. I welcome the clarification of the scope and the illumination that has come from the debate on the amendment, which we had a few minutes ago.
I also agree that the Bill should not apply to debts taken on after its commencement, as we do not want to deter new lending to countries. Therefore, it is right to exclude new lending. However, I very much support the clause and hope that we can agree to it.

Sally Keeble: I will pick up the points that the hon. Member for South-West Hertfordshire made and give some assurances to the hon. Member for Worthing, West. There is a criticism that the Bill is too narrow. Indeed, my original Bill went wider, but that was a different Bill for different purposes. To be honest, if we start to cast the net more widely, we will have problems of definition, and then we will get into issues of uncertainty for countries that might be looking to raise loans, and potential sources of finance might say, Is it going down or up? Might it bump into or bump out of the provisions? In addition, there has not been international discussion about how countries might be treated, and therefore the uncertainty that the hon. Gentleman wants to avoid would be created if we cast the net more widely. As I said, in my previous Bill, we considered different definitions and there were problems with them.
Another important matter is that the Bill has two logics to it. One is about justice for developing countries; the other is about justice for British taxpayers, which gets overlooked a bit. One of the big arguments about this, and why I was interested in including HIPC countries in my original legislation, is that there is a logic that says, Why should British taxpayers pay money to write off debts for developing countries when private, completely uncontrolled vulture funds can swoop in and cream off some of the money? Therefore, it is about different types of debt being treated equitably but also about protecting British taxpayers interest. The HIPC countries have benefited from UK taxpayers funds, so there is a need to ensure that different types of debts are treated equally. That second logic is often overlooked in some of the discussions.
There is also the issue of moral hazard, about which the hon. Member for South-West Hertfordshire is right. It has come more to the fore because of the credit crunch and the banking crisis. The moral hazard of letting people off their debts is why it is so important that the legislation is carefully defined with safeguards so that we cannot suddenly extend the list of countries and extend the debt to others. My right hon. Friend the Financial Secretary has set out why new debts are not included. If we look at the other part of the HIPC initiative, the debt write-offs and the protection against profiteering by vulture funds and others have a quid pro quo, which is that developing countries have to engage in the programmes that are required as part of the HIPC process. That also gives some protection against what otherwise might be seen as the moral hazard of the excuse of private debt.
The Bill is properly targeted, because it deals with the worst cases of indebted countries, it deals with the protection of British taxpayers interests, and it has safeguards against the moral hazard of excuse from debt, which the hon. Member for South-West Hertfordshire identified. I hate to say it, but it is a much better way forward than my original Bill was. It will provide consistency and stability, ensuring that those countries can demonstrate sound governance and that the international process has been fair, sound and consistent. As my right hon. Friend said, if those countries need to take on debts, the international markets will be well disposed towards them.

Question put and agreed to.

Clause 1accordingly ordered to stand part of the Bill.

Clause 2

Qualifying debts: further definitions

Question proposed, That the clause stand part of the Bill.

Tim Boswell: May I say what a pleasure it is to serve under your chairmanship, Mr. Chope? Without wanting to reopen the issues that have been amply rehearsed on clause 1, I too wish to echo my overall support for what is being achieved here. We have a balance not only in terms of the equity of the existing loans but the needs of the developing world, which are real. Even though we do not want to express it, we all probably feel a certain degree of distaste at having to go through the nitty-gritty of working out the balance of assets and liabilities, and I do not intend to add to that process. It occurred to me that my remarks might be interpreted as an attempt to qualify as the authentic Treasury nerd or, as I would prefer to call it, the anorak on the matter, but I have to admit that this particular anorak has not done his homework as well as he might have. If he had, he would have tabled an amendment, but as we are now on clause 2, looking at further definitions, I just want to probe the interaction of a couple of points relating to subsections (9) and (10). That is as near as one gets to scheduling it.
I want to pause on two words. The first is external. In subsection (10) it is clear enough to me that there is a presumption that a debt is an external one, unless someone proves the contrary, which is an interesting way of looking at it. I appreciate that UK rather than international jurisdiction is involved, but I particularly want to rehearse the case of a country listed in the table in the explanatory notes having a currency other than its own, or using another countrys currency. That might define whether the debt is external. For example, although I have not visited the country, I think that Liberia uses the US dollar. I do not know whether that creates confusionif it is the domestic currency it is also the external currency.
My second point is on creditors. I may have misunderstood this, as I claim to be no expert and certainly no advocate of vulture funds, but regarding the interaction of subsections (9) and (10), subsection (9) talks about the creditor as if there were only one within a particular line of debt. Presumably some of the debt is factored around, and may be owned by a number of creditors who may or may not be resident in the particular country, quite apart from the fact that the currency may or may not be a currency that goes from outside that country to another country. I am concerned to probe whether, if there are different categories of creditor, some of whom are clearly resident in the country and others of whom may not be, that affects the treatment of the overall debt, or means that individual debts would be treated differently, depending on whether the holder of the tranche of the debt was in one country or another.
I am sure that there are answers to those questions. Equally, I am sure that there need to be answers, because the trouble with all this, in trying to do something that is a real-world improvement, is that, when we get down to the difficult words in the small print, we might end up with unintended consequences or inequities that we would not wish to defend. I hope that the hon. Lady can satisfactorily explain that, or reflect on it. The last thing I want to do is distract the Committee from the important and substantial task of taking the Bill forward.

Peter Bottomley: May I ask the Committee to pay attention to subsection (10)? Are the words on line 16treat the debtthe best ones? Might it be considered at some stage whether they might change? They are admirably clear in English and that is good, but I wonder whether it is better to say the debt is to be treated as external unless after qualifying debt, on line 15. I leave that as a reflection. Perhaps the current wording is fine, but it can perhaps be improved.
The other issue here is in line 16. It says:
If in any proceedings there is an issue as to whether a debt is a qualifying debt,
and goes on to talk about how the debt is to be treated as external. Might it be worth adding something on the question of externality? There may be other reasons for questioning whether a debt is a qualifying debt other than just that it is external, as we see from earlier in the clause.

David Gauke: It is fair to say that clause 2, which defines the debts to which the HIPC initiative will apply, is based on the World Bank and International Monetary Fund definitions. Clause 2(3)(a) states that the definition of debt excludes
a liability to pay for goods or services that arose on the delivery of the goods or the provision of services.
That is a significant carve-out. I can see why it has been made, but does the hon. Lady have any evidenceit might be unfair to spring this question on herrelating to the scale of the carve-out? A substantial amount of debt that would otherwise fall within the regime might not do so because of that exclusion. Why has that carve-out been made? As I have said, it is probably based on the World Bank and IMF definitions, but it would be helpful if the hon. Lady could shed further light on the issue.

Sally Keeble: Clause 2 deals with some of the details of what is, and is not, a debt. As the hon. Gentleman rightly says, a great deal of discussion has taken place, and much experience has been built up, with both the World Bank and the IMF. On the point made by the hon. Member for Daventry, the definition of residence is not based on currency, but on the residency of the creditor. It is quite common for debts to be incurred in different currencies from that of the country concerned. I do not, therefore, think that that is an issue. To offer complete clarification, however, the definition mirrors the IMF definitions and is not based on currency.
On subsection (10), I understand that the Government have consulted the IMF and that they have been able to apply the residence test without difficulty. They are clear about what is, and is not, an external debt. The subsection clearly sets out what should happen if there is any doubt. On the final point about the exclusion of revenue spending, the carve-out of the liability to pay for goods and services in subsection (3) mirrors the IMF initiative, which also makes those exclusions. They seem eminently practical, because if we included liability to pay for goods and services, almost all Government spending would apply to the kind of relief involved, and that would clearly be unworkable. The approach in the legislation is not about inventing new procedures, but about using tried and tested mechanisms that have been subject to scrutiny and international negotiation to deal with the issues connected to the remainder of the private sector debt.

Peter Bottomley: I hope that the hon. Lady will consider the point that I made on subsection (10). As for the issues raised about debts and subsection (3), under subsection (4)(a), a short-term debt is included in this subsection if it ought to have been discharged
more than a year before commencement.
Does that mean commencement when the Bill becomes an Act or is it some other commencement? It cannot be the commencement of the loan because that would mean repaying it before it was made, so presumably it is the commencement of the Act.

Sally Keeble: I am being told that that is the case. That is correct. I am sorry for not responding earlier; I thought that I had dealt with the points made by the hon. Gentleman.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Amount recoverable in respect of claim for qualifying debt etc

Question proposed, That the clause stand part of the Bill.

David Gauke: The first two clauses are about definitions. Clause 3(1) specifies the mechanism that will apply to reduce the amount of recoverable debt. The definition of the relevant proportion is covered by clause 4. One worry about the Bill relates to article 1 of the European convention on human rights. It may be argued that deprivation of possessions are involved or at the very least the control of use of possessionsessentially, property rights are affected. We have touched on the comparison with insolvency procedures and so on. As I said, it is a fair point. However, there is an interesting assessment of the European convention on human rights in the explanatory notes to the Bill. Clearly, it is a matter to which those who drafted and introduced the Bill have given some consideration.
The explanatory notes set out the argument that the measure is not about the deprivation of possessions, but the control of use, because the creditor still has the ability to recover the debt if it is only able to recover an elementnot allof it. That is therefore a control of use rather than deprivation. I do not know whether the hon. Lady can give the Committee further details on that. I do not in any way pretend to be an expert in such matters, but it is clearly an important part of the argument to say that the clause is not contrary to article 1 of the first protocol of the convention. That must be a strong argument.
The Bill is retrospective, and we have discussed the reasons for that. The explanatory notes state:
Retrospective measures may in principle be compatible with A1P1, although the ECtHR has referred to the need for an obvious and compelling public interest for retrospective measures.
There is no argument about the obvious and compelling public interest in the Bill, although it would be helpful for future legal arguments for the Bill to be given proper scrutiny so that matters can be debated more fully.
One of the points made in response to the Bill and the Treasury consultation is that the compelling public interest applies because the measure will help developing countries. The argument made by some respondents is that such is the narrowness of the Bill that the benefit for developing countriesthe sums concernedis now so small that the compelling nature of the public interest has diminished.
It might be helpful to explore that issue. EMTAthe Emerging Markets Traders Associationhas certainly argued that the only debt covered by the Bill is that relating to Liberia, on which there was a judgment at the end of last year, but that is about it. The Governments impact assessment takes a different view, arguing that HIPCs and potentially eligible HIPCs will benefit by about £145 million in total. We should at least consider the scale of benefit to developing countries. Is it sufficient to say that there is an obvious and compelling public interest in introducing the Bill?

Tony Baldry: I have personal knowledge of substantial debts in countries such as Sierra Leone. Much of the issue relates to the question of the jurisdiction in which parties would bring proceedings. A number of debts in Africa have the potential to result in proceedings brought either in South Africa or in this country, so it is difficult to quantify. However, I reassure my hon. Friend that there are substantially more debts simply than those that have been identified in Liberia.

David Gauke: I am grateful to my hon. Friend for that intervention, partly because he did not call me a Treasury nerd on this occasionperhaps I am an aspirant Treasury nerd.
I am not necessarily endorsing that interpretation but, given the narrow definitions in the Bill, for reasons recognised in all parts of the Committee, given that liability to pay for goods and services is not dealt with, given that the Bill applies only to those debts that can be enforced in the English courts and given that it is retrospective, as well as the various other points we have debated, some criticism of the Treasurys original assessment of the numbers involved is noticeable. Those numbers were reduced from some £250 million to £145 million.
One concern is that we cannot simply look at all the various claims, because by definition they tend to be higher than the claimants and creditors would ever achieve. The Committee might be a useful opportunity to flag up the issue of the likely benefits of the Bill for developing countries, so that we can state with confidence the obvious and compelling public interest in such retrospective legislation. I wish to stress that I am not arguing that there is no such interest, but that the Committee is the right opportunity to address that concern. When the Minister responds, would he set out the Treasurys thinking?
The Treasury acknowledges that quantifying the benefit in such an area is difficult. What about the particular claim that the Bill would address the Liberia matter alone and that nothing much else would apply? That is an interesting point: if it can be refuted, great, but if particular examples of debts that would fall within the regime can be provided, so be it. Such examples would be helpful in answering any arguments made against the Bill under article 1that there is not the obvious and compelling public interest that the European Court of Human Rights would seek in order to justify retrospective legislation. Subject to those points, we have no particular difficulties with clause 3.

John Hemming: Perhaps I see things from a different perspective. Let us say that we have an insolvent country that cannot pay all its debts and we do not want any creditor to be preferred, and let us assume for a moment that the Bill will have sufficient force and that people will not jurisdiction-shop and go somewhere else to enforce the debt. In principle, we are saying that insolvent countries cannot pay all the debts. It is in the interest of all creditors to get paid their poundage, and we are saying that that should be fair and no creditor should be preferred. I do not see that as retrospective, because that is currentthe current situation is that it cannot pay its debts. Yes, that interferes with contracts, but not to the extent that the contract is enforceable. Creditors can get their money paid only because there is an agreement to have a poundage. I do not see the difficulty.

David Gauke: I do not disagree with the hon. Gentleman. To be fair, the word retrospective is used in the explanatory notes. I do not think there is an argument that the provision is explicitly designed to be retrospective for the reasons we debated, and rightly so. I do not disagree with his point that the situation is the equivalent of an insolvency arrangement.

John Hemming: I thank the hon. Gentleman for that. I am looking at page 9 and I accept that that is how the measure is perceived here, whereas I see it as an insolvency procedure for a country.

Michael Connarty: I respect entirely the probing nature of the comments made by the hon. Member for South-West Hertfordshire. This issue is at the heart of the Bill and it is where the overarching public interest is clearly focused. Jubilee Scotland, the Justice and Peace Scotland movement and the Fairtrade movement all see the Bill as a small but significant step. It is about fairness and being against predatory behaviour in the market. It is against selfishness, and there is all-party agreement on it. That is why, although the Bill is a small step and there are some questions about its effect, I hope that in future, it will be built on and not washed away, with people saying, That is the job finished. The Bill is the beginning of a rearrangement of what happens to countries when they fall into deep debt and are exploited for predatory reasons.
I will make a sectarian party comment here. The latest person who declared herself for the Conservative party in Scotland, a lady who runs the Scottish fashion show, said that she wants to support the Conservative party because she wants the UK to be more selfish. I intend to send her the speech made by the hon. Member for South-West Hertfordshire on Second Reading, because clearly, Governments over the period and of all ilks realise that we are not about being selfish: the UK is about building on a generous view of what we do when countries fall into deep debt.

Tim Boswell: Will the hon. Gentleman give way?

Michael Connarty: Not at the moment. I do not mind if the hon. Gentleman wants to make comments, but I do not want to take too much time.
The hon. Member for South-West Hertfordshire put the problem down to bad management by Governments, but let us be frank: having talked to people who are concerned about this issue, I have always felt that it is 200 years of exploitation by the developed world that has reduced most of these countries to their level of indebtedness. We have exploited their resources, and at one point stole their people to use them as slaves. Let us not kid ourselvesmost of their indebtedness has arisen because we have taken their wealth and given them nothing in return. We are not just being generous; we are also dealing with our own conscience.

Tim Boswell: In seeking to intervene on the hon. Gentleman I was, if anything, about to reinforce his point. I, too, think that this is in our long-term national interest. The existence of depressed, poor countries that can find no relief from their long-term situation is not a satisfactory state of affairs. I would not have risen to speak were it not for the fact that I ought to declare an interest as a member of the Parliamentary Assembly of the Council of Europe, which, in a sense, is the guardian of the European convention.
I have a couple of general and one or two specific remarks to make. I am no lawyer, although, as it happens, I have a daughter who is a human rights lawyer and takes an interest in the convention. I find the European approach interesting. Firstwe should get this point on the record, and I say this as a Conservativewe are talking about not the convention but article 1 of the protocol to the convention. Property rights are, in a sense, subordinateI am not suggesting they would be in a judgmentto other, perhaps more serious issues such as murder, torture and the rights of prisoners and of family life, which are convention rights. That may say something about hierarchy.
My second point is that, looking at the European convention, which I do quite often, I find it striking how it is understood that there are clashes. There is no absolute way of resolving an issue according to some principle, because there are clashes here between the rights of predators and the laws of contract: the prudential virtues of the laws of contract on the one hand; and, on the other, the situation in which some developing countries find themselves. So it is not unfamiliar to people in European jurisprudence to be saying, We have to try to sort out these relative pressures.
I wish to commend the Treasury for once. One normally gets a peremptory certificate from a Minister, but here we have a full explanatory memorandum following consultation in which the issue is seriously agonised about and explained in a way that I find very reassuring. We come back to the point that there is an overriding public interest. It is in our public interest, as well as that of developing countries, to get this issue sorted out in a fair, orderly and equitable manner between the various creditors, as the hon. Member for Birmingham, Yardley said. I am comfortable with that approach.
I have two questions, the first of which concerns forums, and perhaps the hon. Member for Northampton, North will come back to it. If my constituency neighbour, my hon. Friend the Member for Banbury, is right, there are many potential debts that might come to our courts. There is always the danger of forum shoppingof people going somewhere else if they think they will get a better deal. Can we have an appraisal from the Bills promoters as to whether that is likely? If that happens, in a sense it will devalue the Bill and create potentially awkward international anomalies.
My second point may be contraryI am merely reflectingbut I would like the promoters response. Let us make a comparison with the historic position of, say, Chinese Boxer debt or pre-Russian revolution bonds. I hasten to say I do not own nice share certificates or stock certificates, but if I happened to be the owner of some of that ancient and completely useless sovereign debt, I would have two choicesor I might have had two choices if I were lucky. One is to be paid off something by a country that wishes to re-establish its credit rating and be able to service debts in future. If it says, Well give you something, I could assent to that debt. On the other hand, if I decided to hold out, or liked the stock certificate better, I could as an individual stay non-assented to that debt and I would still have my full entitlement. According to the term of art used in the explanatory memorandum for the right to sign for debt, I would not have anything in my hands because it would not be paid, but I could still in principle claim the whole lot and I could be in either the assented or non-assented category. I wonder whether the hon. Member for Northampton, North will reflect on that. If that situation existed it would further untidy the position, in that I am sure it would be better for the country in question to be able to know exactly where it stood with all the creditors involved with it.
My basic view is that we should be taking this on the chin as the right thing to do. There are difficult, complex and detailed issues that need to be thought about intensively to get the final outcome resolved, but I would not in any sense wish them to devalue the need to get on with things and seek a common haircut for all holders of debt. At the moment in the real world, that debt cannot be serviced or discharged. It is doing more damage than good to the international economy.

Peter Bottomley: I ask the promoters to considernot necessarily todaytwo minor points. Subsections (4) and (6) start with the word but. I was brought up to believe that any sentence that starts with the word but is not needed. I do not think it is a condition. If one reads the amount recoverable is limited, does it mean the same as with the but added? If the but has no purpose, there is no point in taking it out and no point in putting it in the first place.
A more serious point relates to a possible ambiguity in line 30, which states that
the amount recoverable under a compromise agreement is limited to the amount that would be recoverable.
Does that mean limited to as a ceiling, or is it limited to a precise amount? It is unclear.

Stephen Timms: Let me comment on a couple of questions that have been raised about the Governments perspective, the first of which concerned compatibility with the Human Rights Act 1998 and European legislation. I am grateful to the hon. Member for Daventry for commending the Treasury on this occasion. The explanatory notes outline the Governments view that the Bill is compatible with the European convention on human rights. It reduces the recoverability of debts in line with the HIPC initiative. The reduction, in our view, is not a deprivation of property but a control of use. The European Court of Human Rights has found there to be a deprivation only where there is a total practical or legal extinction of the rights of ownership. Under the Bills provisions, the creditors will still retain an asset of some economic value. Although the face value of the debts will be considerably reduced by the Bill, their current market value is likely to be much lower than their face value. We consider that control of use to be justified in the interests of promoting fairness among creditors and promoting the development of poor countries. My hon. Friend the Member for Linlithgow and East Falkirk set out the moral case for doing that.

David Gauke: The Minister has highlighted the Treasurys view that the reduction is a control of use rather than a deprivation of possessions. What would be the significance if it was a deprivation of possessions, and why is it important that it is a control of use?

Stephen Timms: It is an important distinction in order to secure that the Bill is compatible with the Human Rights Act. The hon. Member for Daventry referred to compatibility with article 1 of the protocol to the European convention on human rights. The measure is proportionate for compelling public policy reasons. It promotes fairness among creditors and the development of poor countries. Creditors that enforce their debts for the full face value divert resources that are intended for development, including debt relief and international aid provided by the UK Government.
Is this worth doing and is it, ultimately, a substantial measure? Of course, it is true that, compared with overall financial flows, the amounts we are talking about are small. For the countries involved, however, they are significant. The case of Liberia has been mentioned, and the amount involved is reported to represent 5 per cent. of its Governments annual revenue. That will have a huge impact on that country. The World Bank survey reports other active cases that are larger still. I think that every member of the Committee agrees that the threat of any resources being diverted to vulture funds, away from a country where almost half the population live on under a dollar a day, is very serious. That concern is shared on both sides of the Committee.

Tim Boswell: Has the Treasury given any thought to the alternative of offering the creditors expropriation at the current market value of the debts, and then paying the appropriate compensation? Would that be an alternative approach? Would it be dearer or cheaper, and would it be equally compatible with the European convention on human rights?

Stephen Timms: The World Banks debt reduction facility helps settle the commercial debts of HIPCs on terms that are compatible with the HIPC initiative. It negotiates buy-backs at the deeply discounted rates consistent with the initiative by using funding from donors, including the UK, to purchase and then cancel debts from commercial creditors that choose to participate. In the case of Liberia, last years operation bought back 97.5 per cent. of eligible debt, with a full value of $1.2 billion, for just 3 per cent. of that value. Of course, we cannot be absolutely sure about what will happen because of secrecy on the part of the commercial players involved. There is bound to be some uncertainty about the number of cases that will come forward, but the Bill prevents creditors from taking action against the HIPCs to get full value.
Last years World Bank survey of HIPC Governments reported 14 active or unresolved law suits by commercial creditors worldwide, with a total value of $1.2 billion. Active law suits are reported against, among others, Ethiopia, Uganda, Sierra Leonementioned by the hon. Member for Banburyand the Democratic Republic of Congo. The survey has reported 54 cases since 2002, about a fifth of which have been brought in the UK, and new cases continue to arise.

David Gauke: I am, again, grateful to the Minister for giving way with his characteristic generosity. First, what would he say to the argument that is sometimes made that using surveys of litigation can be an inaccurate way of measuring claims, because by their very nature claimants tend to have an optimistic assessment of their claim? They claim for as large an amount as possible. Court judgments tend to reduce the claim as a matter of course, and there is the whole issue of enforcement. Some argue, therefore, that trying to assess the benefit for developing countries on the basis of a survey is not a reliable methodology. What is the Ministers response to that? Secondly, what trends are there in the number of claims being made? He mentioned the 54 claims. Is there a reduction in the number, or is it increasing? What is the trend in the enforcement of the claims?

Stephen Timms: I certainly accept, as I have already indicated, that there is a degree of uncertaintythat is inevitable. One cannot give absolutely definitive figures. We have set out our best valuation in the impact assessment, which is that the Bill will prevent £145 million from being transferred from heavily indebted poor countries to litigating creditors through free-riding. While acknowledging the uncertainty, I think that that is as good an estimate as one can make. We can, however, be certain that the Bill will prevent the minority of commercial creditors that litigate and extract repayment in excess of that permitted under the HIPC initiative from using UK laws or courts to do so. That is an aim that I think the whole Committee shares, and that the Bill will fulfil.

Sally Keeble: I think that most people have had their questions about insolvency arrangements, the management of the debt and the arrangements for orderly wind-down answered, and my right hon. Friend the Member for East Ham dealt with the human rights issues, so there is absolutely no point in my covering those matters. I just point out that the calculation of what are sustainable debts for the countries has already been agreed, and is set down in the explanatory notes.
In addition, we talked earlier about the fair treatment of different types of debt, and I point out that some of the commercial creditors have already behaved properly, going through the process and writing off the debt. The issue is about dealing with different classes of debt equally. On the point raised by the hon. Member for Worthing, West, the HIPC amount is a ceiling, and if parties agree to less than that amount, they can recover only the lesser amount.
Other hon. Members, including my hon. Friend the Member for Linlithgow and East Falkirk, made the case about the obvious and compelling circumstances. It rests with some of the countriesand here I mention the steps taken by the British taxpayerto underwrite some of the costs. Looking at the list of countries, we see that one of them is Haiti. We must ask whether there are obvious and compelling circumstances for Haiti that require the kind of management of debt that we are talking about. In most cases, things are being done perfectly properly. However, a country in such circumstances should not be prey to a fund that suddenly decides to hit it for the full amount of repayment of debt.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Clause 5

Judgments for qualifying debts etc

Question proposed, That the clause stand part of the Bill.

David Gauke: Clause 5 flags up another issue concerning the European convention on human rights, relating in particular to the enforceability of judgments. Before turning to some of the legal arguments, may I put down a question for the Minister or the hon. Member for Northampton, North, about the significance of clause 5? How much of the £145 million that we have been talking aboutthe Treasury estimate of the benefit accruing directly to developing countries as a consequence of the Billrelates to judgments that have already been made and is therefore dependent on clause 5, and how much does not? In part, that goes back to what I was talking about earlierthe EMTA claim that the beneficiary of the Bill will be Liberia, essentially, because of the judgment made at the end of last year, and that the effect will not be felt more widely. A breakdown of which claims will relate to judgments already made and which will not would be helpful.
Clearly, we must deal with the issue of article 6 of the European convention on human rights and the enforcement of judgments. The explanatory notes are helpful in setting out the Governments case as to why article 6 will not apply. Again, I do not claim any particular expertise, but I note that the Government basically argue that article 6 will not be a problem. First, they acknowledge that the European Court of Human Rights has repeatedly found an infringement of article 6 in circumstances where states have refused to enforce judgments or have delayed doing so.
However, the explanatory notes set out the grounds on which the Bill can be distinguished from such decisions. Those grounds include the state itself being a party to the proceedings, or situations in which the state could and should have adopted other measures to achieve its objectives. Clearly the statethe UKis not party to the proceedings. Could the objectives have been achieved in other ways? We have touched on alternatives, but it might be helpful if the Minister or the hon. Member for Northampton, North, underlined the reasons why the legislation is the best way to achieve the aims.
The second argument is that the Bill would be significantly hindered if it did not extend to judgment debts, which is the point that I was making a moment or so ago. The explanatory notes say:
given the number of creditors who have obtained judgments on their debts against HIPCs.
It would be helpful if we had further information on that point. However, as an argument for saying that article 6 does not apply, I do not know that it is as successful as the first point.
The third distinguishing feature is that in this context, there is little difference in principle between creditors who have obtained a judgment debt and other creditors. The explanatory notes continue:
Whether or not creditors have gone through the court process, which may have been no more than a formality, is not a robust basis for distinguishing between creditors.
I can see precisely what the thinking is, and I can fully understand it, but it seems to suggest that the more contentious the judgment, the more important its enforceability. That may well be right, but I do not know how that compares with other cases that the European Court of Human Rights has debated.
The final point, set out in the explanatory notes, is that
judgment debts are possessions within A1P1. It would be inconsistent for the state to be given a wide margin of appreciation in relation to A1P1 for judgment debts, but to be subject to an absolute prohibition when controlling the use of judgment debts by the terms of Article 6.
I hope that it was helpful for me to set out the reasons in the explanatory notes, so that those who subsequently read the debates will be clear that we have considered those points. I would be grateful to the hon. Member for Northampton, North, and the Minister if they could provide any other comments regarding ensuring that we do not run into a problem with article 6 as a consequence of the Bill.
Clause 5 is key. If we stripped it out, we would substantially reduce the best estimate of £145 million. It will be helpful to have some clarity on the numbers. However, clearly, we need to ensure that the measures will not result in endless litigationwe need to be on robust ground in that area. However, I have no further remarks on clause 5.

John Hemming: I compare the clause with insolvency legislation, where judgment debt is treated the same as non-judgment debt. Neither of the creditors is preferred, and on that basis, the application is not retrospective.

Stephen Timms: Unfortunately, I am not in a position to give the hon. Member for South-West Hertfordshire the breakdown he was asking for. If anything comes my way, I will let him know. [Interruption.] Actually, I can give a little illumination. Our estimate is that if clause 5 was removed, the benefit would be reduced by a third. It is of that order of magnitudesubstantial, as he thought.
However, having legislation that affects cases where a court has already given judgment rightly raises some important issues. It is not something that should be done lightly or oftenit needs to be considered carefully. Here, there is a compelling case for doing so on three grounds, which the hon. Gentleman touched on. First, there is $1.2 billion-worth of HIPC debts worldwide on which judgments have already been made or action is continuing. Other creditors can theoretically go to court before any legislation comes into effect to get judgments on those debts, which would then be excluded from the legislation. Creditors would be able to enforce those debts in UK courts against the assets of poor countries, disrupting trade and investment, which would clearly be inconsistent with the aims of the legislation.
Secondly, excluding judgments would not be economically logical. The purpose of the legislation as a whole is to limit repayment of otherwise valid debts to the level the debtor can afford to repay.
The question that follows is whether to exclude some kinds of debts, such as judgment debts, which would, in effect, be treating them more favourably. I do not think there is a strong argument for doing that; it is logical to treat them equally. The judgment will have been reached on the validity of the debt, rather than on the debtors capacity for repayment. The hon. Member for Birmingham, Yardley is right to highlight the strong similarities with insolvency law, which provides for a fair and orderly restructuring in situations in which creditors claims in total exceed the capacity for repayment. As he says, in insolvency law, a debt on which there is already a judgment is not, in general, treated more favourablythat is, to be repaid at the expense of other debts. The same effect should apply in this legislation, as the hon. Gentleman suggested.
Thirdly, excluding judgment debt would considerably reduce the effectiveness of the legislation. Around a third of the value transferred to creditors would be at stake. If we accept the reasons for enacting this legislation in general, it is important that the judgments be included. Although I recognise the seriousness of this issue, we should include judgments and this clause should stand part of the Bill.

Sally Keeble: All the points have been well covered. As I have said, the main point is to have consistency and to deal with different types of debt equally and fairly. To exclude judgment debt would be to give status to a particular type of debt, which would not be consistent with the orderly management of the debts of the country in question. It is very important, therefore, that clause 5 remain part of the Bill.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6 ordered to stand part of the Bill.

Clause 7

Exception for overriding EU or international obligations

Question proposed, That the clause stand part of the Bill.

David Gauke: I would be grateful if the Minister or the hon. Lady set out the types of judgment that override EU or international obligations, and that could provide an exception to what the Bill sets out generally.

Stephen Timms: I support the clause because it is necessary for the UK to fulfil some European and international obligations. Where we are entitled to refuse to enforce foreign judgments in fullfor example if they go against UK public policyit is consistent with the aims of the Bill to do so. None the less, there are some kinds of judgments and arbitration awards which the UK is obliged to enforce in full. It is right that the Bill should not apply to those, and clause 7 provides accordingly.

Sally Keeble: The only thing I would add is that the exceptions are set out in clause 7(2).

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Saving

Question proposed, That the clause stand part of the Bill.

Peter Bottomley: What does clause 8 mean?

Sally Keeble: I had hoped you would call the Minister first, Mr. Chope. When claims have already been settled they should not be reopened, because it would cause many difficulties and would be of questionable benefit.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Commencement, extent and short title

Question proposed, That the clause stand part of the Bill.

David Gauke: I do not know whether I can match the brevity of my hon. Friend the Member for Worthing, West. I simply ask why there is two months between the passing of the Bill and its commencement. Why not commence it immediately?

Sally Keeble: I understand that that is standard.

Gerald Kaufman: If it is in order, Mr. Chope, will you allow me to say how sorry I am that my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) is not here today owing to serious illness, and how grateful we are to him for carrying on the Bill after my hon. Friend the Member for Northampton, North initiated it? I pay great tribute to my hon. Friend for the knowledge, persistence and dedication she has shown in bringing the Bill forward and getting it to this stage.

Christopher Chope: Obviously, what the right hon. Gentleman has said is in order, but it is slightly premature because we still have two new clauses to deal with.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

New Clause 1

Treasury duty to report on impacts
The Treasury shall within 12 months of the commencement of this Act publish and lay before Parliament a report setting out its assessment of the following matters
(a) the impact of the Act on the availability and cost of lending to countries to which the Initiative applies,
(b) the impact of the Act on the availability and cost of lending to other developing countries including potentially eligible initiative countries,
(c) the monetised value of the transfer from creditors to debtors as a consequence of the Act, and
(d) the impact of the Act in determining the choice of law or choice of jurisdiction for financial contracts..(Mr. Gauke.)

Brought up, and read the First time.

David Gauke: I beg to move, That the clause be read a Second time.
May I echo the words of the right hon. Member for Manchester, Gorton? He perhaps rushed in a little early with his comments. Perhaps that can be put down to his newness in this placeor perhaps not.
I have tabled new clause 1 because in an ideal world, we would have followed a slightly different process. Concerns exist outside this place about the impact that the Bill will have. Some people argue that it goes too far and some, as I said earlier, argue that it does not go far enough. The hon. Member for Linlithgow and East Falkirk has made the case that we should build on it. Others would argue that that is a potentially dangerous argument and undermines confidence. I am not taking a position on that.
In an ideal world we would have followed the proceedings that the Government have brought in in recent years whereby we have witness sessions. Value would have thereby been added to the Bill and to this process. We could have examined and scrutinised the arguments for going further. We could have addressed the concern that the Bill may damage lending to developing countries. It would have been a helpful process. We all realise where we are in the parliamentary timetable. As a party, we have been keen to assist the process and move as swiftly as possible, consistent with our having Committee stage as early as possible to move the Bill forward as quickly as possible. As I said, in an ideal world we would have gone through a lengthier scrutiny process. The witness process, which is a welcome development of proceedings in this place, would have been useful in these circumstances.
A fair degree of uncertainty exists. It is to the Treasurys and, indeed, the Ministers credit that they acknowledge in the response to the consultation process that sometimes there is uncertainty in such matters. It would be helpful to consider the matter again to see what has actually happened. Will some of the concerns turn out to be overblown? Will there be a detrimental impact? What will be the benefit to developing countries in terms of the debt that is not pursued? How many cases will be dropped? How much will the amount to be recovered be reduced by as a consequence of the judgment, and so on?
We all recognise that there is some uncertainty about a lot of these issues, and there are two alternative ways of addressing that uncertainty. I do not intend to press new clause 1 to a vote, but one way of addressing that uncertainty is to issue within 12 months of the Acts commencement a report that assesses the various issues that have been raised today.
First, we should consider the impact on the availability and cost of lending to countries to which the initiative applies, which is at the heart of what we are doing. Secondly, we should consider how the initiative applies more generally to other developing countries, including, potentially, eligible initiative countries. There is the question of the impact, in terms of the monetised value, of going from the creditors to the debtorsthe relevant developing countries. As the Minister acknowledged, there is a fair degree of uncertainty about that. Finally, there is the question of the impact of determining the choice of law or the choice of jurisdiction for financial contracts. We have not particularly debated that issue today and it is not at the heart of the Bill; nevertheless, the Minister is certainly aware of concerns that this initiative might have an adverse impact on the UKs position as a place to do business. Even if we put those concerns to one side, there is a worry that contracts will be pursued in other jurisdictions and that this initiative will have no great effect in the grand scheme of things, simply because other jurisdictions will be used.
The hope, as expressed by the Treasury and the hon. Member for Northampton, North, is that we will lead the way and that other jurisdictions will follow suit. On Second Reading, we debated the fact that in the US a similar measure attempts to do the same thing. I do not know what the likelihood is of such a measure ever reaching the statute book. None the less, it would be helpful for us to look at these matters again. Uncertainties exist now, when we are passing this Bill, and the parliamentary timetable has meant that we have been unable to question and scrutinise in Committee those who have raised concerns about the Bill. Looking at the Treasury response to the consultation process, it is clear that plenty of people have raised such concerns. Given all that, an opportunity to look again at this measure would be a good thing.
In a moment, I will say a little about new clause 2 and the alternative means it proposes to address the uncertainty that exists. However, if new clause 1 were accepted, the Treasury would produce a report and respond to these concerns, and we would therefore be in a better position to assess the Bills impact than we are this morning.

John Hemming: I understand that we are very short of time. New clause 1 has merit; new clause 2 does not.

Stephen Timms: I, too, shall be very brief. Let me simply assure the Committee that we keep all legislation under review. We would certainly do so in this case, without the need for the proposed duty to do so. I am grateful to the hon. Member for South-West Hertfordshire for saying that he does not intend to push new clause 1 to a vote. As I have given that reassurance, I hope it will not be necessary for him or other Members to do so.

David Gauke: I am grateful for the remarks from hon. Members.
I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Duration of Act
(1) This Act expires at the end of the period of one year begining with commencement; but this is subject to subsections (2) and (3).
(2) The Treasury may by order provide that this Act (instead of expiring at the time it would otherwise expire) expires at the end of the period of one year from that time.
(3) The Treasury may by order provide that this Act has permanent effect.
(4) An order under this section is to be made by statutory instrument.
(5) An order under this section may be made only if a draft of the statutory instrument containing it has been laid before, and appoved by a resolution of, each House of Parliament.
(6) If this Act expires by virtue of this section
(a) the Act is to be treated as never having been in force, and
(b) accordingly, where
(i) a judgement was given, or order or arbitration award made, on a relevant claim (as defined by sectio 5(2)) while the Act was in force, and
(ii) the amount of the judgement, order or award is, as a result of section 3, less than it would be if that section had not applied in relation to the claim, the amount of the judgement, order or award is to be treated as equal to the amount it would be if the section had not applied in relation to the claim..(Mr. Gauke.)

Brought up, and read the First time.

David Gauke: I beg to move, That the clause be read a Second time.
I do not need to run through the various arguments about the current uncertainty again, but my view is that it would be helpful to revisit the matter. It is worth quoting the Treasurys response to the consultation. Paragraph 2.30 notes that
Predicting the scale of any negative spillovers from legislation is very difficult in advance of legislation.
New clause 2 is essentially a sunset clause. It means that we could proceed with the Bill as drafted, and then assess what happens over the next 12 monthswhether there has been a risk premium, and what the benefit to developing countries has been. At the very least, the new clause would stop the pursuit of outstanding debts under the HIPC regime over the course of those 12 months, and would provide immediate relief for developing countries that are in the scheme.
After 12 months we would make another assessmentI propose doing so through secondary legislation to ensure that we do not have huge difficulties with parliamentary timeand take a view on whether the concerns raised have proved immaterial or not. We could then proceed to place the Bill on the statute book on a permanent basis. Alternatively, we could say, So far, so good, but we dont have all the evidence, and we could extend the measures by a further year. There is also a riskI do not think that this is likelythat the Bill will have an impact on the risk premium. If that happened, we would not proceed with it any further, and it would lapse.
The underlying point is that it is vital that we tread carefully in this area. In that interim 12 months, I hope that we would have a proper opportunity to scrutinise the provisions further. It is not for this Committee to direct the International Development Committee, but this would be a useful area for it to examine. It could dig into the evidence on the basis that the Bill was on the statute book. We could then see what the Bills impact was, and would have the opportunity to return to the issue.
The legislation is somewhat rushed, and we are doing what we can to provide a fair wind. I thank the Treasury Ministers, and the parliamentary draftsmen who assisted with the drafting of the new clause. There has been cross-party co-operation, and I take responsibility for the spelling mistake in the first line. The new clause would be a good way of ensuring that we can proceed with the Bill while addressing existing concerns, so that we can ensure that the legislation actually helps developing countries. We would then be able to legislate from a position of understanding, and with knowledge of the Bills implications, rather than having to rely too much on guesswork, as I suspect is currently the case in some respects.

Stephen Timms: I shall listen with great interest to what my hon. Friend the Member for Northampton, North, has to say on the new clause. I have some reservations about it, but I should say on behalf of the Government that, in the interests of ensuring that the Bill is passed smoothly, I am happy to accept the new clause. It would leave the Bill intact and logical. There is also an advantage in ensuring that the effect on new lending is assessed before making the Bill permanent.

Sally Keeble: Obviously, everyone wants the legislation passed and progress to be made in dealing with developing country debt. It is right that progress should be made in an orderly and proper way that serves the interests of developing countries, so that they do not find themselves damaged by a risk premium. Everything in the proposed legislation is carefully targeted and structured and will not produce a risk premium. I will not go into the reasons for that, but basically creditors have their own ways of judging when a country is a bad risk, as the hon. Member for South-West Hertfordshire knows.
However, at the end of a Parliament there may be a suspicion that legislation is hurried, and it is particularly important to give real assurances about that. That is why I say to the hon. Member for Birmingham, Yardley, that although we would prefer not to have to accept a sunset clause, in the interests of ensuring that we can make orderly progress, the new clause should be agreed. We should, therefore, accept the principle of a sunset clause. If we agree that that is a way forward, I am sure that secondary legislation can be made in the next Parliament. That will mean that there is not a huge problem with parliamentary timetabling; that can be done in an orderly way, so that we can retain the cross-party consensus that has been so important in making progress with the Bill.
In conclusion, I repeat the point made by my right hon. Friend the Member for Manchester, Gorton, about our great regret that my hon. Friend the hon. Member for Denton and Reddish could not be here to take the Bill through Committee himself, as I am sure he would have wanted. I hope that we will be able to proceed to Report and Third Reading, so that we can get his legislation moving. The Bill will be a world first, and I am sure that it will be greatly appreciated by other jurisdictions around the world and by developing countries.

Question put and agreed to.

New clause 2 accordingly read a Second time, and added to the Bill.

Bill, as amended, to be reported.

Committee rose.